Douglas AG (DOU) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the DOUGLAS Group Q4 Full Year 2023-2024 Earnings Call. I am Yusef, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Sander van der Laan, CEO. Please go ahead.

Thank you, operator, and good morning to all of you from a rainy Dusseldorf in Germany. We are happy to share with you the financial results of our financial year '23-'24, which ended on the 30th of September. And we -- in addition to that, we want to give you some highlights about last year and also I want to give you a feel for the strong start of a new calendar year. Between -- as you know, we will do this between Mark, our CFO, Mark Langer and myself. I will start with business highlights. I will then hand over to Mark to talk about our last year's performance and the Q4 numbers. And then I will come back with a short strategy update peak season before we wrap up and open up for Q&A. Well, on the next page, we can see the results of our -- mostly of our fourth quarter. So we delivered a strong number of full year sales number of almost 9%, but we also finished strongly in the last quarter of the year with 8.3% sales in -- sales growth in stores and 9.5% sales growth on the E-Com channel. You can see that we've been able to translate that into EBITDA growth, not only in absolute terms, but also we were able to deliver a margin expansion of 30 basis points in the quarter and 50 basis points for the full year. Clearly, the fourth quarter is -- we have a seasonal business. So the fourth quarter is, EBITDA-wise, below the full year number, but that is very normal in our industry and in our business. You know that we have IPO-ed the company earlier this year. And as a result of that, we are happy that we can also report a very strong net income development, which is clearly driven by the operational improvements but also by the debt reduction and other elements, and Mark will come back on that as well. Last but not least, we have launched our new strategy anymore, our current strategy 1.5 years ago, Let it Bloom. That strategy is in place. We have implemented a number of steps, a lot more to come, and I'll also give you a further update in the course of this presentation. Many things went well at DOUGLAS in '23-'24. So there will be a lot more highlights to talk about versus today, but we've just chosen a few to give you a feel for what has happened. So first of all, we are focusing on omnichannel. That means that we want to grow our stores. We want to grow our E-Com business. But more importantly, we want to grow the combination of these 2. But we have made very significant progress on the store side with some significant new store openings, a bit more than 50 new stores we've opened in the last year. We opened or refurbished roughly 130 stores across the markets. We had a fantastic opening or reopening of our, let's say, flagship luxury store in Vienna, that is actually the picture on the right. an 800 square meter store but already now our #2 store, let's say, in the total store network across Europe. But we also had many more, let's say, spectacular openings, our first store in Leuven, Belgium, a flagship store in Zagreb just opened a few weeks ago. And last weekend, we opened, finally, I would say, our flagship store in Pompeii in a very scale brand-new shopping center in Italy. It is not only on the store side where we're investing because we also are making significant investment on the E-Com side. So we have made, let's say, a step-up in the positioning and the design of our online shop, our website and app. You know we are in the premium beauty industry so we also want to make sure that both our store experience and our online experience is aligned with each other. Hence, we have implemented a new design, more quality, more beauty, you could say, in a way, a little bit less price communication. That doesn't mean that price is not important, but it's a function of our overall positioning. And we made the first steps of this redesign. There's more to come because we will do this in certain waves not only geographically, but also from a time perspective. So important progress. In addition to that, we have -- and that has also impacted our E-Com business. One of our strategic initiatives is the rollout of our global tech stack. We've historically a very fragmented, let's say, IT application landscape with too many applications in our business. And we want to move towards a more harmonized, let's say, application landscape with significantly less applications. And we've chosen a number of applications which we considered the group standards. And one of that is the Commerce Cloud platform from SAP, which we already have active in some of our bigger countries like the Netherlands, Germany, Poland and Austria, but we have now replaced the legacy infrastructure at NOCIBE and the legacy infrastructure in Czech and Slovakia by basically the group standard, which basically enhances the customer journey and also it enhances the sales and it also simplifies our application landscape. In France, we had some start-up, I would say, challenges in the beginning, which has negatively impacted our sales development in the fourth quarter. And Mark will also say a few things about that, but I just wanted to give you a heads up on that already. There is a lot more, let's say, IT application implementation in the pipeline going forward because it will take a number of years to fully transform to this kind of this group-wide tech stack platform. Another highlight is the continued growth of our DOUGLAS corporate brand collection. So we have 4 brands, DOUGLAS, Susanne von Schmiedeberg, Jardin Bohème and one.two.free! and here, you see an example of a brand campaign. The title of the campaign, IF YOU KNOW YOU KNOW. And we've made some pretty, I would say, innovative and well designed and developed communication statements in the markets with strong results. As you can see in the bottom left, you see some of the sales results in our biggest markets. You know what, we are in premium beauty. We are focusing on 5 core beauty categories. Fragrances is historically our biggest category. It still is. Fragrances is, by the way, showing a very healthy growth. But in the other 4 categories, skin care, color cosmetics, hair care and accessories, we would like to go a bit fast, to grow a bit faster because clearly, we want to be less dependent on fragrance only. And I'm also happy to see that skin care and hair care is growing disproportionately faster versus fragrance, which also creates more stability in our portfolio going forward and also skin care and hair care categories where the store and the added value of the beauty adviser plays an important role. Especially with skin care, people are seeking advice. They want to try it before they make the purchase. So -- and this is where our business model, our omnichannel business model is working well. In addition to the deployment of Commerce Cloud in 3 of our important markets, we also have implemented the first phase of SAP SuccessFactors. Well, you being an analyst, have heard more about SAP SuccessFactors going forward. We currently have only in the HR domain 80-plus applications, so 80-plus legacy applications across the group. And a lot of those applications are going to be retired because they will be replaced by HR SuccessFactors. And this is one of the first implementations where we've been able to implement HR SuccessFactors as a step one in all our countries. That is a pretty big step for DOUGLAS. We've learned a lot from that, and we're going to do more of that in the future. But I'm happy with this first major milestone. And then also in the HR domain, we've made another significant investment or step. We have developed what we call the DOUGLAS Academy. The DOUGLAS Academy is basically our internal education institute, where we want to train, to develop, to inform and to motivate our 18,000 beauty advisers across the markets, and we want to do that more and more by using modern digital tools. So we've launched an app, the DOUGLAS Academy app. And that app is approachable for all our BAs, beauty advisers, either on a desktop or on their own smartphone or at home if they would like to do so. And in that app, we are giving information and training elements for our BAs. We're doing that in the local language. So here, the technology is again helping us because we are not translating into Estonia anymore. This is all, let's say, machines, which are doing that. An important step, which is technology enabled, which is also, I'm happy to share. And then last but not least, we're extremely proud that just a few months ago that we were informed by Forbes, a well-known international magazine, and Statista that DOUGLAS has been chosen by 100,000 women across the entire world as the top company to work for in the retail and wholesale domain. So in retail and wholesale, we've been seen by 100,000 women as the #1 place to be. Across all industries globally, we were elected #3. And in Germany, we were, I guess, by the German women in this case, being elected as the #1 place to be for women as well. So very, very happy and proud. We know that we have a large female customer base. The vast majority of our employees are also female. Well, we have a few men like Mark and myself. But in that sense, a very -- company which very much embraces females. And I'm extremely proud that we've been recognized by many, many women outside DOUGLAS because the women at DOUGLAS hopefully already discovered that before. Like I said, much more to talk about. I will come back a little bit later with four specific strategic updates. But before that, I'm happy to hand over to Mark Langer, our CFO.

Thank you, Sander, and warm welcome also from my side. Ladies and gentlemen, today, I'm very happy that the fourth quarter of last fiscal year was just another in a series of successful quarters both in terms of top line growth and profitability. Successful momentum that we have seen throughout the financial year also continued in the fourth quarter. This is based on the success of our attractive omnichannel value proposition with a large product range, and in person and digital beauty advisers that is valued by our customers. Overall, we were able to welcome more customers in both channels. In contrast to last quarter, our group like-for-like sales were higher than the reported sales. This is fully attributable to the divestment of Disapo, as the Disapo sales are no longer included in our E-Com sales. Like-for-like sales growth accelerated again in the fourth quarter to 9.4% versus previous year. As we were able, again, to pass on price increases to our customers, our gross margin remained virtually stable despite the fact that we employed more personnel in our expanded store network, increased wages last year to mitigate the impact of high wage inflation. We improved on our personnel cost ratio. This was partially supported by the integration of the former separate Parfumdreams warehouse. We will speak about that a little later. While our logistics cost ratio improved, we consciously spent more on marketing. In total, we translated a sales increase of 8.7% into an adjusted EBITDA increase of 10.9%. Let's take a look and how our 5 segments contributed to this group success, starting with our largest segment, DACHNL, comprising Germany, Austria, Switzerland, Netherlands and Belgium on the next slide. Within the segment, we saw double-digit growth on reported and like-for-like level. This growth was driven by both channels with an even stronger performance from our E-Com business. We continue to see a strong increase in footfall in customer numbers in our stores despite the fact that 26 of these stores has been refurbished. Our customers increased their basket sizes and the net sales per item significantly while keeping the number of items in the basket stable. In the E-Com part of the segment, we saw similar trends. The number of orders increased as well as the basket. The result was more than 50% of sales increase. As a result of that strong development, the E-Com share in the segment rose to 37.8%, far above the 13.6% group average and the highest among our omnichannel segments. When it comes to adjusted EBITDA, operational effects as well as year-end closing entries are to be mentioned. On the operational side, we are able to pass through price increases. We received more marketing contribution from our suppliers and also spent a bit more on marketing. Staff costs increased on an absolute level but decreased in relation to sales. The logistic costs increased in absolute terms and in relation to sales. With regard to year-end closing entries, the release of voucher liabilities for vouchers not redeemed as well as for beauty points which expired contributed to the overproportionate increase in adjusted EBITDA. In total, this drove the strong uplift in adjusted EBITDA and adjusted EBITDA margin for this segment. Moving further west on the European map, we come to our second largest segment in the group, France, the segment with significant onetime effect in the fourth quarter. The footfall on our French stores decreased as well as the conversion rate, leading to a lower number of our customers. As we have refurbished 13 stores during the quarter, we expected a temporary decline in visitor numbers. Significantly high basket sizes and especially high sales per item more than made up for that and led to a slightly increase in sales. In E-Com, we saw a temporary dampening effect from the start of the rollout of the new platform that Sander already introduced to you. This led to notably less orders and smaller baskets. The E-Com share in the segment, therefore, decreased to 17.1%. Alongside the platform rollout, the necessary IT support, our IT costs increased. In a competitive environment with high promotional intensity, we received more marketing contribution from our suppliers but also spent more than the marketing ratio increased. In contrast, our personnel costs ratio was lowered and alongside the lower E-Com sales, also the logistic costs decreased. In addition, there was a onetime effect in the prior year from rent reimbursement, mainly in context of COVID-19. Moving south to our segment, Southern Europe, on the next slide. In our store business, a much higher number of visitors were attracted by our offering. The concluded refurbishment of 14 stores did not materially dampen this. With a nearly stable conversion rate, many of the visitors became customers. The segment was the only one where the basket size decreased due to a lower number of items for basket. There was no down trading, so sales per item increased slightly. On our last call, I already reported an upward trend in our E-Com channel in Southern Europe. This trend has continued and we are back to sales growth. It was driven by a significantly higher number of orders as well as larger baskets. The share of our E-Com business increased to 12.3%. When it comes to adjusted EBITDA, the positive development seen in the past quarters continued. We are able to fully pass through price increases, thereby improving the gross margin. Also, we received less marketing contribution from our suppliers and spent more on marketing, the higher sales led to a lower marketing cost ratio. At the same time, we reduced the personnel cost ratio, while the logistic cost as a personnel sales increased, partially due to the strong E-Com business. As a result of these effects, the adjusted EBITDA rose by nearly 9% and the adjusted EBITDA margin remained virtually stable. Making a jump to the East and coming to our fastest-growing segment, Central and Eastern Europe. This segment once again achieved the highest level within the group with regard to sales growth and overtook Southern Europe in terms of size in the fourth quarter. In the store business, we recognized a strong -- strongly higher footfall in the large number of our stores as we opened 28 new stores since the beginning of the fiscal year and despite the refurbishment of 13 stores in the fourth quarter. The slightly lower conversion rate was more than offset by the increased footfall and led to a higher number of customers. In contrast to the other segments, this was the only one where the sales per item declined. As the number of items per basket increased to a much higher degree, the basket size were larger. Our E-Com was particularly attractive to many customers. We saw significantly more orders with larger basket sizes. This combination drove the sales increase in E-Com. As this performance was stronger than the one of the stores, the E-Com sales contribution rose to 21.1%. We did experience a higher promotional intensity in these markets. Suppliers also contributed more to marketing, leading to a nearly stable marketing cost ratio. This led to a decline in the gross profit margin of the segment. Following last year's wage increases and an increased headcount due to the store openings, our personnel costs increased in absolute terms but were offset in relation to sales. Despite significantly higher sales, our logistic costs ratio improved. As explained on earlier occasions, the opening of new stores is a temporary dampening factor for margin as it takes the time until the store is fully operational and the customer become familiar with the new locations, bringing it to the expected footfall and sales level. Refurbishments bring along temporary store closures with no contribution for the time of refurbishments. All effects combined led to the decrease in the adjusted EBITDA margin despite a higher absolute adjusted EBITDA. Now to the fifth segment, our segment Parfumdreams/Niche Beauty. On our last call, we discussed the temporary effect of the transfer of the former separate Parfumdreams warehouse to our central warehouse operation in Hamm in Germany. Now this integration has been successfully completed. The segment has resumed its growth trajectory at sales level. We received more orders with higher basket sizes. As part of our strategy, Parfumdreams is positioned for highly price-sensitive customers. We made some price investments to win back customers who were affected by last quarter's lower product availability and spent more on marketing. In addition, there was a onetime effect from the derecognition of a purchase fee in the prior year. On full year level, the structural profitability of the segment shows healthy profit expansion. Following the closure of the former Parfumdreams warehouse and the reduction in headcount, our personnel costs went down in absolute and relative terms. However, the beforementioned effect led to the decrease in adjusted EBITDA. Let me summarize how the development at segment level have added up per channel on group level. Please go to the next slide. Our stores welcomed a significantly high number of visitors, also supported by the net opening of 38 owned stores in the fiscal year '23-'24. We converted a large part of them into customers with an average -- on average higher basket size, more items per basket and higher sales per items. E-Com grew for the tenth consecutive quarter. The channel benefited from more orders as well as on average higher basket sizes. E-Com had a sales contribution of 30.6%, almost unchanged from last year's Q4. Let's move on to the next slide to review the major developments in our P&L. On our last call, I showed you a pro forma P&L. At this point in my presentation, this is no longer necessary as Q4's first quarter in which we see the full effect of our IPO, the refinancing and the related benefits from the lower leverage as well as the absence of IPO or other exceptional costs. For the full year, you will find a pro forma P&L in the appendix. Thanks to our pricing strategy, which allowed the pass-through of input prices increases our customers, and combined with purchasing abilities, we increased gross profit and capital gross profit margin stable. The main influencing factors to the upside in our net operating expenses this quarter was higher marketing spend. Both our suppliers and us, we invested more in customer activation. On the other hand, the personnel cost ratio and logistic costs improved. As the increase in net operating expenses was lower than the sales increase, the EBITDA increased stronger. Adjustments to EBITDA played a minor role and had a positive impact on the reported EBITDA number. The financial result improved significantly thanks to our new financing structure. At income tax level, we benefited from a one-off effect from the capitalization of deferred tax assets on loss carry forward but without -- even without this effect, the net income for the quarter would have been -- would have improved significantly. On a pro forma basis, for this fiscal year, net income stood at EUR 244 million. Turning to net working capital and CapEx on the next slide. Our average net working capital was EUR 234.4 million. This resulted from higher inventories to support the strong business as well as trade bonus and marketing receivables. As a percentage of LTM sales, the working capital amounted to 5.3%, unchanged to Q3 and 40 basis points better than last year. With the warehouse move to Germany and the continuous use of the AI-based inventory management software, RELEX, in Germany, Austria, Switzerland, Italy and Poland, DIO decreased by 4 days. As planned, our CapEx was significantly higher with a strong focus on store refurbishment and store openings, mainly in Central Eastern Europe. Many investments related especially to the 72 stores that were refurbished as well as the 15 store openings in this quarter. Furthermore, we continue to invest in the establishment of a group-wide uniform E-Com platform and further investments into our IT stack as well as our international e-commerce part of our Let it Bloom strategy. Let us now review our cash flow and liquidity position, starting with the free cash flow bridge on the next slide. As usual, this is year-to-date view. As we have already discussed most of the positions, I will only explain the position others in M&A as we haven't touched on them so far. The cash inflow from the position others resulted especially from value-added taxes. The divestment of Disapo went along with some consulting costs as well as a dowry repayment to the buyer reflected in the cash outflow from M&A. Thanks to the positive development in adjusted EBITDA and despite our investments, our free cash flow after EBITDA adjustments amounted to EUR 524 million, an increase of 9%. The next slide shows our liquidity and leverage. Our net debt including IFRS 16 liabilities amounted to EUR 2.3 billion carrying amounts and was significantly reduced by the IPO proceeds of EUR 850 million and the equity injection of our major shareholders prior to the IPO. Further supported by our strong business development, our leverage ratio decreased to 2.8x. You will find the cap table in the appendix. We aim to continue our deleveraging path by focusing on strict cost discipline and cash management and by capitalizing on our strength. Let us now move on to our outlook on fiscal year '24/'25, and let's turn to the next page. Based on our omnichannel success, the expansion of our store network and the continued improvement of our E-Com capabilities, we expect to achieve sales between EUR 4.7 billion and EUR 4.8 billion in fiscal year '24/'25. We intend to grow profitably, thereby increasing our adjusted EBITDA to a range between EUR 855 million and EUR 885 million. Through a sustained improvements in net working capital management, we aim to decrease the net working capital to be below 5% of sales. Based on the improved adjusted EBITDA, the better financial results following the refinancing as well as D&A and tax rates at levels comparable to the average of the previous years, we aim to achieve a net income between EUR 225 million and EUR 265 million for the next fiscal year. All this will help us to move towards a leverage ratio of 2.0x at the end of calendar year 2025. Ladies and gentlemen, with that, I conclude the financial part of today's presentation. Thanks for your attention, and I'll hand it back to you, Sander.

Yes, Mark. Thank you very much. So as already said, we now -- I now want to give you a brief update on our strategy development and deployment. So a bit more than 1.5 years ago, we have launched our strategy, Let it Bloom, which is based on four pillars. So as you can see here, we want to be the number one beauty destination in all our markets. We want to offer the most relevant and distinctive range of brands. We want to deliver the most customer-friendly omnichannel experience, and we want to build an efficient and -- focused and efficient operating model. Those four strategic pillars are translated into 20 strategic initiatives, as you can see on this slide. And in line with what we've done in previous quarters, we have chosen today to give you an update on four, and these are the four highlighted initiatives. So the first one I would like to talk about is our store network development. Mark and I have already said a few things about it. So that's going well. We continue to expand and to modernize our store network. We are trying to build -- to integrate our -- the customer journey more and more, let's say, omnichannel. We are steadily approaching our target to open 200 new stores net in a 3-year time frame and to open -- to refurbish, sorry, 400 of our existing stores. The focus of our expansion sits predominantly on Central and Eastern Europe, although in most of the remaining countries, we also have opened a few stores. But the focus is in CEE. And from a refurbishment perspective, we did 70 refurbishments in Q4, but the focus very much sits on DACH, on France and on Italy. This is basically where we have 70% of our existing store network. We are very happy with the recent openings of some flagship stores like Zagreb a few weeks ago, Pompeii just before the weekend. And there is more to come. So we're going to open a fantastic store in a premium -- in the premium location in Antwerp, Belgium. We're going to open a beautiful new luxury store in Berlin. And we're also going to open a premium store in Salzburg, but there is a lot more in the pipeline. So gross, we've opened 54 stores. Net, it was 35, if I say correctly, 34. Because we closed 20 stores. A number of those stores were, by the way, franchisee stores which were closed. And we've refurbished 144 stores in the full year. So I would say we're well on track, and you can also really start to see the benefits of this in our non-like-for-like development. And in the second year, we will see the benefit of this in our like-for-like developments. The second area I wanted to talk about is about CRM. So as you know, in premium beauty, it's extremely important to know your customers and you want that our customers know us. We have, by far, the largest premium beauty customer database of Europe. So we have currently 59 million people who signed up for our Beauty Card program across Europe. In most of our countries, that program is live. We have fully redesigned, let's say, the strategy and the plan going forward, and we will start to implement this redesigned program as of the beginning of 2025 starting with the Netherlands with the objective to basically transform the program in all the markets to this new group standards. We're going to open -- introduce a tier-based loyalty system, basically with different tiers. And the key objective is to improve loyalty. The challenge in premium beauty is a customer might be a customer of DOUGLAS and visit our stores online or off-line once or twice per year, but the big opportunity is to improve frequency. A customer who buys at DOUGLAS 5 times per year, that will be a great customer. And once the frequency is going up, we also want to make sure that the spend per trip is going up. And what we really see, once a customer has migrated to being a single channel customer into an omnichannel customer, that has a significant positive contribution to the spend per customer on an annual basis. So we are well on track to expand and develop, let's say, our Beauty Card program. The third initiative is about Retail Media. Retail Media is a rapidly growing advertising channel, and we do see that a lot of the fast-moving consumer good brands but also the premium luxury brands are shifting a lot of their advertising money into retail media. In many countries, retail media is already bigger than the TV advertising market. And in the premium beauty domain, we are basically leading the pack. So we have a team of roughly 40 people today. The team has been expanded in the past year, and we will expand that going forward. Because here, we do see that the investment in an FTE has a very, very, very short payback. This is an extremely attractive revenue stream. We are significantly margin accretive. So the EBITDA of Retail Media is significantly above let's say, the EBITDA on our omnichannel business. We have recently introduced our new self-service platform, which basically means that the brands can basically book the media themselves, which is especially interesting for the smaller brand partners because that will require less FTEs on our side. And we also have started with the initial phase of data collaborations with Trade Desk, where we basically are leveraging data also outside the owned -- the DOUGLAS-owned, let's say, communication channels. Retail Media has grown in the past financial year with 34%. So this has been helping both the top line, but it also has been helping, let's say, EBITDA percentage. And we believe there is a lot more in the pipeline, both top line and bottom line. The fourth initiative I want to talk about is on ESG. Clearly, sustainability is an important theme. Let's say, in our society. It's an important theme for the government and for the EU, but it's also an important theme for companies. And we, being the largest premium beauty retailer across Europe, we feel our responsibility to take this very seriously. We do, as a minimum, clearly want to comply with current or future legislation, but our ambition goes beyond that. We have developed a plan, and we've talked about it before also as part of the prospectus, which is based on 3 focus areas: people, planet and products. And in each of those focus areas, we have initiatives in place. Some of the achievements is that we have been chosen as a Great Place to Work. So we are now officially certified. We have a very, very high share of women, not only in operational jobs but also in leadership jobs and clearly extremely proud about our election as the company to be for women across Europe. In the planet domain, we have a number of initiatives in place to reduce our Scope 1 and 2 emissions. We have significant energy reduction program in place in our stores. which has also started to become material and becoming visible in our P&L, certainly in combination, let's say, with the more positive development of energy prices recently. We are currently rolling out smart meters across all our stores in all the countries, which gives us the opportunity to monitor, let's say, energy consumption not only locally but also from a central perspective. And we also have committed ourselves that with those international landlords who have that, to sign up for green lease agreements, which basically means that both the landlord and DOUGLAS are committing themselves to further improvements which will basically improve the sustainability of our store in a respective shopping center. Last but not least, our products. We are ultimately a retailer selling brands and products. We have implemented or are implementing our new sustainable packaging policy for corporate brands. We have set clear targets for our corporate brands, and we also have assessed already 70% of the brand range from an ecological footprint perspective. We will report on this in our financial report '23/'24. That's actually going to be bigger going forward because there is a lot more of what we need to do and what we are also working on going forward. With that, I wanted to conclude on kind of the strategy update and a few words on the peak season. So our financial year starts on the 1st of October 2024. And clearly, the last quarter of the calendar year is a very, very important quarter for our business. There are 3 big moments, commercial moments: Singles' Day, Black Friday, which we call Beauty Friday. Both Singles' Day and Beauty Friday went very well. We reported very strong results -- or we've not reported, we've seen strong results internally in the company across markets and across channels. So in that sense, we started well. The Christmas season is still going on. We are 5 days before Christmas. So the peak of our Christmas sales is basically starting right now. And clearly, we are also curious to see what the end result will be. The answer will be clear to us on the 1st of January, and we will communicate that to you in the course of February. But we started well into the new financial year. A few things about Beauty Friday -- sorry, a few things about our campaign and Beauty Friday. So clearly, when people think about a gift and about beauty, they should think about DOUGLAS. And in many countries, DOUGLAS is synonymous -- not only synonymous for beauty but also synonymous for gifting. And that is why we have developed a campaign, GIFT THE DOUGLAS FEELING, which is a campaign which we've launched across all over Europe in all channels, both DOUGLAS-owned channels, but also above the line channels. And I'm very happy and proud to see the development of that. And then a few things on Beauty Friday at DOUGLAS. So here, you see some numbers. I'm not going to talk about all the numbers. But you do see that the peak time for customers to shop is 10:00 at night. These are not customers visiting our stores, at least not our brick-and-mortar stores, because they are closed. So you can also see that the E-Com channel is disproportionately big, let's say, during Beauty Friday. 25,000 orders per hour at the peak moments. But also very proud to report to you that in Germany that the DOUGLAS app was the #1 downloaded and used app in the shopping domain and, let's say, in the German retail markets. So clearly, the sales numbers and the EBITDA numbers, we will come back on that later, but we had a strong Beauty Friday event, let's say, behind us. So, I think it is time for me to wrap up before we're going to open for Q&A. So in summary, DOUGLAS has reported a very positive business development in '23/'24. You've seen the numbers, and you've heard the voice over from both Mark and myself. You have read the press release. You will also read our annual report. DOUGLAS started well into the new financial year. Omni-channel -- sorry, we also closed '23/'24 with results which exceeded not only our original guidance but also our raised guidance. We believe that in premium beauty, omnichannel is the way forward and the DOUGLAS Group is very well positioned in both channels to grow our omnichannel business in the years ahead of us. Our Let it Bloom strategy is in place. We have already achieved major milestones, but there is a lot more in the pipeline and to come. We are giving guidance today. As Mark already said, from a sales perspective, we believe that we can deliver between EUR 4.7 billion and EUR 4.8 billion of sales. Our adjusted EBITDA will be between EUR 855 million and EUR 885 million. And our average net working capital will move to a percentage below 5%. We also believe as a second, let's say, part of parameters that it will be possible to increase our net income to the range EUR 225 million - EUR 265 million. And by the end of the calendar year 2025, we believe that we have further deleveraged to, let's say, a ratio around 2 versus 2.8 for the end of last financial year. And I do believe that from a commercial, strategic and financial perspective that not only today, but certainly by the end of 2025, we are in very good shape and well positioned for the years beyond that. With that, I wanted to give the opportunity for you to ask questions.

[Operator Instructions] The first question comes from Sreedhar Mahamkali from UBS.

I've got 3. Maybe I'll just go one at a time. I think in DACHNL, Mark, you talked about some voucher liabilities and loyalty point releases impacting the segment positively. Can you give us a sense of magnitude? Also, was this prompted by any change in assumptions? And do you anticipate any such further reversals in '24-'25? That's the first question. Shall I go through other questions? Or do you want me to pause here?

So maybe if you could just go through the 3 topics and then...

Yes. Okay. So second one on France. Again, I think you've talked about the impact of tech platform on sales. Any challenge you can give us an idea of what kind of impact you've seen? Or maybe put it another way, in the new quarter as it actually returned to growth online in France, but you also seem to have indicated some EBITDA impact -- adjusted EBITDA impact also in France from the platform rollout. Anything you can help us in terms of how to think about the impact there? And the last one is CEE. I think the margin dilution from new stores already started, just to recall, probably in Q2 this year. Do you anticipate once we annualize that from Q2 in the new financial year onwards, margins will actually start progressing forward given the strong growth in operating leverage?

Yes. Thanks, Sreedhar. And I think 3 very relevant questions that you raised. Let me start with the beauty points and the voucher reversal. So in general, without getting too much detail, DOUGLAS has a very generous redemption strategy. So if you're still running short on Christmas presents and you' opt for a DOUGLAS vouchers, which we clearly highly recommend, whoever receives your gift, say they doesn't have to redeem until New Year or Easter. But typically, we will hold this valid for a period of up to 10 years. There are sometimes local legally deviating rules to that. But as Sander has highlighted, as part of our CM program, similar to the validity of beauty points but also vouchers, that we are moving to a more standardized approach to it. Also which allows us to work on a more standardized tech platform, which administrates not only 1 but highly 22 markets. So that's one. Please see what has been reflected on the full year numbers as part of our way to move to a more standardized practice across the group. Secondly, also on previous annual calls the review on the agent structure on vouchers is a typically year-end move that we do. So we review it with our auditors as part of the end process. The number was slightly elevated. So to answer your question, it was in fiscal year '24 about a mid-single-digit and mid-single-digit euro amount that were recorded as a deviation to previous year, which is slightly elevated to previous years. But we think that's maybe a slight positive deviation to what we expect. It's a little bit difficult to forecast because if you know better than I do what will happen over the next 12 months in terms of redemption, then I could give you a more precise answer. Clearly, we will update that. One, there's a certain assumption embedded clearly in our forecast in terms of redemption and ultimately fortified vouchers in the next 12 months. But we believe this is realistically and cautiously guided or embedded in our guidance for the next year. On the tech impact for France...

Sorry, just to clarify. Was it a mid-single-digit euro million, above what you were expecting, that's how I should read it?

Yes. Then on France, clearly, we're moving exactly in the direction where we want to take this company. If you compare the capabilities in terms of what the new website will offer, and it's not only highlighted that in the past annual presentation, if you look at year, which is far more premium and appreciated by our brand partners on the new NOCIBE website. But this is now one tech stack which allows us now to be far more efficient in terms of updating new functionalities that we might have tested in market A and bring it not only to all EPP markets, as we call them. Without going into too much specific on our first quarter, we will not give you more trading insights than what we have done so far. We are very happy with the improvement of E-Com sales into the first quarter in France. Clearly, French consumers, we have a very loyal customer base, many repeat consumers not only in stores, but E-Com. They need to get used to the new navigation, the layout of the website. So we did expect phase of changeover, which we clearly, as you can imagine, put into the fourth quarter. Because as we mentioned at the beginning, commercially not as relevant as Q1, and we're absolutely confident that we did it at the right time with the right execution, we will start to see the benefits on that in the first quarter in France. We will not give you more specific guidance on the commercial development in France in the first quarter. But overall, we are very happy with the e-commerce development in France post the change in the platform, which is now 4 to 5 months behind us.

Maybe, Mark, if I can add. So because separate from the E-Com implementation, it's also good to know that the French market is currently pretty tough. We do see that premium beauty continues to grow strongly in Europe with 6%, 7%, 8% depending a bit on the countries. But France is an outlier to that. So in France, the premium beauty market is under pressure, recorded almost no growth in the past few quarters. So in that sense, the environment has also not been very helpful in addition to the E-Com element, which we have basically implemented ourselves.

Maybe on the CEE topic. And Sreedhar, as you know, we have to look at from 2 angles. First, the region remains despite the slight deterioration, relative profitability also -- on profitability versus previous year, far above the profitability from all other segments. Keep in mind that the DACH profitability was a bit distorted by what we discussed as your first question. So on average, if you look at on a full year base, CEE has an EBITDA margin at 300 to 400 basis points above other omnichannel segment. And this is still true. We will not slow down refurbishment and expansion in those regions despite the fact that we recognize and acknowledge that some of these new stores are not yet in the first 6, 12, 18 months at the profitability of the existing one. And clearly, that's not static. Also here, we see good development. So -- but clearly, new stores tend to close the gap quicker than the existing base is improving it. So overall, we expect that the dilutive impact over the 3 years expansion period, you remember the 200 net stores that we will add, half -- 40% of that roughly in Central and Eastern Europe, will have also in the quarters to come maybe a dilutive impact. But it's only dilutive to maybe historical performance. It's always accretive to the group overall contribution. I think that's important to keep in mind that the group impact from the expansion in CEE is accretive to the profitability to the total group, all other things equal.

The next question comes from Warwick Okines from BNP Paribas.

Yes, 3 from me as well, please. So the first one is what was the price pass-through in Q4? And what are you expecting price inflation to be in, in the market in '25? The second question is, could you give us a sense of what you think the fragrance market might grow at in '25? Appreciate other categories are faster growing. But that important category, what was the growth do you expect? And then the third one is, could you just give us a sense of your expectations for CapEx? And what guidance could you give us on the tax rate next year? Is it going to normalize?

Okay. Shall I take the second question, Mark?

Yes, and I will take the other 2.

Okay. So maybe on fragrance, we recently got a report from Circana on the recent development, and basically, you see that all categories are growing. Fragrance -- I'm not talking about DOUGLAS, I'm not talking about the market is growing slightly below. But since it's a big category, if the growth is slightly lower, it still adds up significantly in the DOUGLAS numbers. So we expect a continuation of this growth going forward. We also see that still the Niche segment, the really, really luxury and premium brands continue to grow faster despite the tough economic environment. And from an inflation perspective going forward, let's say, if you talk about cost price inflation, because inflation is a difficult term, let's say, in DOUGLAS to measure. But let's say, from a pass-through, if you talk about the brands, we see normalized, let's say, price increases from the brands. So 2%, 3%, I would say, is what we basically see across the board versus high single-digit or low double-digit numbers, let's say, in more recent years.